Why Is the Production Possibilities Frontier Concave to (Bowed Away

question 72

Multiple Choice

Why is the production possibilities frontier concave to (bowed away from) the origin?

• A) Consumers have declining marginal utility, so their relative satisfaction from consuming a good changes as they move from high levels to low levels of consumption.
• B) The shape of the curve is due to the marginal costs of producing the two goods. At high levels of output for a particular good, the marginal cost is very high, and the firm can use the same inputs to produce a relatively large quantity of the other good.
• C) For a production possibilities frontier, we no longer assume firms are price takers, and the input prices and output prices change as the firms alter their mix of outputs.
• D) none of the above

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